Was The Banking Crisis Caused By Too Much Testosterone?
The UK based Mailonline has released information on a study that simulated the effects of testosterone and the stress hormone cortisol on those who trade in the banking and stock market industries..
The conclusion made by scientists is that the worldwide financial crash could well have been caused by traders with high levels of cortisol and testosterone working in both Wall Street and other worldwide Stock Exchanges.
Researchers at Imperial College in London set up a simulated trading floor and then checked the hormone levels of over 200 test volunteers – both male and female.
The volunteers then took part in mock trading games where they had to buy and sell assets between them…. When they were given doses of either testosterone or cortisol, it was found that they responded by investing in more risky assets..
The lead scientist – Dr Ed Roberts told us “The results do suggest that both cortisol and testosterone promote risky investment behaviour, especially in the short term.” – He continued “ ‘We only looked at the acute effects of the hormones in the lab. It would be interesting to measure traders’ hormone levels in the real world and see what the longer-term effect might be”.
Researchers feel that it’s the competitive and stressful trading environment that causes the elevated hormone levels.
In the first study, 142 volunteers (male and female) traded virtual assets.. those who had higher levels of cortisol were found to be more likely to take risks, leading to instability in the trading prices… In the second study, 75 male subjects were given either testosterone, cortisol or a placebo… it was found again that those receiving the hormones were more likely to make more riskier trades.
Another professor – Joe Herbert of Cambridge University has previously look into this issue and he found that traders often made higher profits by making more riskier trades during the morning periods when their natural testosterone levels were higher..
Previously it was not clear wether the rises in hormone levels were a result of unstable financial markets or the root cause… this recent study now falls somewhere in the middle… in a volatile trading situation, elevated levels of both testosterone and cortisol can lead to unstable, erratic trading with unrealistic optimism…
If you work in the trading markets, please be aware.. your hormone levels could have a direct effect on your ability to perform to the best of your ability…….